GOP Weighs 21% Tax On University Endowments

Update (1335ET): As Trump’s ‘tax the rich’ idea has reportedly resulted in “massive finger pointing and disarray,” according to Charles Gasparino, Bloomberg now reports that House Republicans are weighing a proposal to dramatically increase taxes on wealthy university endowments, according to people familiar with a draft of the tax package under discussion. The plan, not yet finalized, would create a tiered system that raises the current 1.4% levy to rates as high as 14% to 21%, depending on endowment size.

The measure is part of a broader effort by President Donald Trump and his allies to reshape higher education policy and assert greater control over elite institutions. Trump is expected to meet Friday with House Ways and Means Committee Chair Jason Smith to review the draft. Portions of the bill could be released as soon as Sunday night or Monday.

Trump’s 2017 tax package, which Republicans are moving to renew, implemented an endowment levy of 1.4% on net investment income, similar to one that private foundations pay. That levy generated more than $380 million from 56 colleges or universities in 2023 — though it affected just a small fraction of the 1,700 private, nonprofit US schools. 

House Budget Committee Chairman Jodey Arrington floated a long list of possible budget cuts in January that included raising $10 billion over 10 years by raising the endowment tax to 14%. -Bloomberg

The proposal targets some of the nation’s wealthiest schools, including Harvard and Yale, where per-student endowments exceed $500,000. Harvard, with a $53.2 billion endowment, has been in a legal battle with the federal government over funding freezes and has previously faced threats to its tax-exempt status.

Republicans argue the move would ensure universities direct more of their funds toward student needs and away from initiatives opposed by conservatives, such as DEI programs or legal challenges to Trump-era policies.

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On Thursday, Bloomberg reported that President Donald Trump has been urging GOP lawmakers to raise taxes on Americans making at least $2.5 million annually, or couples making $5 million. We waited for a denial, only to get some ‘clarification’ today.

In a Friday morning Truth Social post, Trump suggested that Republicans ‘should probably not do it,’ but “I’m OK if they do!!!”

Trump says that the problem with ‘even a “TINY” tax increase for the RICH’ is that ‘Democrat Lunatics would go around screaming, “Read my lips,” the fabled Quote by George Bush the Elder that is said to have cost him the election,” – referring to then-candidate George H.W. Bush’s 1988 campaign promise not to raise taxes as president – which of course he did not keep, and was seen as a factor in his loss in the 1992 election.

Trump reportedly reached out to House Speaker Mike Johnson (R-LA) to push the tax, which would restore a 39.6% bracket to its pre-2017 level. The current top rate stands at 37%. The president also reiterated support for ending the carried interest tax break, a longstanding benefit claimed by private equity and venture capital managers, according to the report.

The proposal is undoubtedly an attempt to mitigate concerns over the GOP’s current plans to make Trump’s 2017 tax cuts permanent without having to chip away at hot-button entitlement programs.

Representative Jason Smith, the Missouri Republican who chairs the powerful House Ways and Means Committee, is expected to meet with President Trump today. A congressional aide told BBG that Smith plans to assure the president that the forthcoming tax bill ‘will deliver on the president’s priorities.’

While the proposal’s full contours remain under negotiation, it is not yet clear whether it would include an expansion of the existing small business income exemption under the individual tax code.

The push to raise the top rate comes as House Republicans face mounting fiscal pressure in drafting what President Trump has labeled the “one big beautiful bill” — a multi-trillion-dollar package aimed at extending the 2017 tax cuts while enacting a range of new promises, including eliminating taxes on tips and overtime pay.

To finance the plan, GOP leaders have struggled to find consensus on cuts to entitlement programs such as Medicaid, prompting President Trump to float alternatives.

Last month, Johnson said that he was “not in favor of raising the tax rates, because our party is the group that stands against that traditionally.”

Also last month, Trump told Time magazine that “I would be honored to pay more, but I don’t want to be in a position where we lose an election because I was generous — but me, as a rich person, would not mind paying and you know, we’re talking about very little,” adding “We’re talking about one point. It doesn’t make that much difference, and yet, I could just see somebody trying to bring that up as a subject, and, you know, say, ‘Oh, he raised taxes.’”